Falling Costs Drive Growth of Solar Energy Generation in India

An Indian security guard walks among solar panels at the newly inaugurated solar photovoltaic power plant at Khadoda, in Sabarkantha district, about 90 kilometers (56 miles) from Ahmadabad, India, Friday, June 10, 2011

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Two years after India launched an ambitious plan to dramatically increase the use of solar power, this renewable energy is beginning to light up homes and fire factories. Falling costs of solar energy are making it a viable alternative to power generated by fossil fuels.

In remote Nagaur district in northern Rajasthan state, gleaming solar panels installed by an entrepreneur generate five megawatts of solar energy. A state-run electric utility supplies the power to hundreds of village homes.

Inderpreet Wadhwa heads Azure Power, the company handling the project, which will ultimately generate 35 megawatts of power.

Similar solar farms are springing up in several states as businesses and investors begin to tap the potential of solar power. Wadhwa says they are changing the perception about solar energy.

“All of a sudden people say, hey, this is not a pilot or a test or a science that is going on. This is actually here to stay and compete with other sources of energy,” said Wadhwa.

Two years ago, India generated virtually no solar power. Although most of the country is drenched in sunshine for 300 days in a year, the high cost of solar power equipment had deterred investment in the area.

But faced with a huge energy shortfall and under pressure to reduce its carbon emissions, in 2010 the government launched the so-called National Solar Mission. Its target -- to generate 20,000 megawatts of power by 2022, and reduce dependence on coal-based power plants which provide most of India’s energy.

Tobias Engelmeier is the head of Bridge to India, a research and consulting firm in New Delhi. He says a sharp drop in the international price of solar panels in the past year is making this ambitious goal look achievable.

“In the initial year or so of the National Solar Mission, it was seen very skeptically by both international investors and international companies and there was doubt about whether India would provide a viable, profitable market for anyone,” said Engelmeier. "That has changed as solar prices have come down significantly by up to 30 percent on a global level.”

So far the cost of solar power is nearly double that of coal-based power. But it has already become cheaper than power generated by burning diesel, which is widely used by Indian homes and factories during power outages - a common occurrence.

That is why entrepreneurs hope that both commercial enterprises and homes will slowly begin to replace their diesel generators with rooftop solar installations.

Wadhwa of Azure Power is optimistic that the gap with thermal energy will also narrow down.

“The only challenge to solar is cost and that is on the favorable side…While you are exploring greater capacities of thermal power projects, the fact remains that coal is getting to be a scarce commodity, and that is going to drive the prices of commercial power higher,” said Wadhwa.

Solar power companies are mostly importing photovoltaic panels from China, the U.S. and Europe. But as demand rises, there are hopes that a domestic manufacturing industry will grow in the country.

“Essentially, the objective is not only to import everything and put up, the objective is that gradually our domestic capacity also increases in the process, and that would add to the cost reduction ultimately,” said Amit Kumar, who is with The Energy and Resources Institute in New Delhi.

The growing use of solar energy is good news for both the India and the world. It will not only help plug the country’s massive energy shortfall, it will also help to tackle one of the most pressing global problems - climate change.

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